Former investment banker and seasoned investor Ian Yoong believes that the earnings for large players is expected to be muted in the second half of 2024
PETALING JAYA: The recently concluded corporate results season for the third quarter of 2024 (3Q24) saw most property firms reporting results that came inline with analysts’ full-year expectations and delivering favourable year-on-year growth.
In light of the solid 3Q24 performance, analysts expect the trend to continue into 4Q24.
BIMB Securities Research analyst Mohd Fadzerin Arrifin said he expects the Housing Credit Guarantee Scheme to drive first-time homeownership and continue stimulating growth in the residential real estate sector in 4Q24.
“The introduction of a 100% stamp duty waiver on properties priced below RM500,000 and a salary hike for civil servants (effective Dec 1, 2024) are also anticipated to boost economic activity and support the property market through 4Q24 to financial year 2025 (FY25).
“Furthermore, we expect ongoing infrastructure projects, including the Penang light rail transit (LRT) Mutiara Line, resumption of LRT3 station construction and increased investment in data centres, would drive mixed-use developments, raise property values and increase demand for residential and industrial real estate,” he said in a recent research report.
On expectations of property developers’ entire FY24 sales performance, former investment banker and seasoned investor Ian Yoong believes that the earnings for large players is expected to be muted in the second half of 2024.
“The bulk of profit recognition from the strong sales in 2024 and 2025 will be recognised in 2025 and 2026,” he told StarBiz.
“There are of course exceptions, such as those that have been selling their land bank rather than the finished product. How much landbank can a property developer sell?”
Yoong noted that property developers have been more cautious in launching new projects in 2023 and 2024.
“This could be attributed to the rise in interest rates in that period. This has resulted in unsold properties falling.
“Malaysia’s property market overhang improved in the first half of 2024 compared to the second half of 2023, with the total number of unsold units falling by 12.3% and their aggregate value declining by 20%.”
Analysing the recently concluded 3Q24 financial reporting season, BIMB Securities’ Mohd Fadzerin said the overall sales performance of developers remained “consistently strong”.
“The recent corporate earnings season delivered favourable outcomes for property companies, as all four companies under our coverage met expectations.
“The strong year-on-year performance was primarily driven by robust property sales and significant progress in construction projects.”
Mohd Fadzerin noted that Sime Darby Property Bhd
achieved a record nine-month (9M24) sales performance, with property sales rising to RM3.2bil – reflecting a 25% year-on-year increase.
“This milestone represents 91% of the group’s FY24 sales target of RM3.5bil.”
Additionally, he noted that Lagenda Properties Bhd posted a record high quarterly property sales of RM349mil, driven by strong contributions from Perak, Johor and Selangor.
“For 9M24, Lagenda’s sales totalled RM869mil, a 9% year-on-year increase, highlighting the success of its affordable housing model across Malaysia.”
Separately, Mohd Fadzerin noted that Mah Sing Group Bhd recorded RM1.85bil in property sales during the 9M24 period and remains on track to meet its RM2.5bil sales target for the year.
“This was supported by strong demand for affordable residential properties under its M-Series, especially from first-time and young buyers.”
He added that Matrix Concepts Holdings Bhd also maintained a strong sales momentum, with new property sales reaching RM341.7mil for the quarter.
“This performance was largely driven by Sendayan Developments, which contributed 86.3% of total sales.
“As of Sept 30, 2024, Matrix Concepts’ unbilled sales stood at RM1.3bil, providing substantial earnings visibility for the next 15 to 18 months.”
Meanwhile, MIDF Research said the 3Q24 financial results season saw mixed earnings, but with better overall sales.
“Earnings of property companies were mixed in 3Q24. Out of seven property companies that released earnings in November 2024, five reported earnings that came in within expectations except for Sunway Bhd and S P Setia Bhd.
“Earnings of Sunway came in stronger than expected, as earnings from the property development division were boosted by lumpy earnings from projects in Singapore.”
On the flip side, the research house noted that earnings of S P Setia missed its expectations as progress billing were weaker than expected, while tax rates were higher.
Overall, MIDF Research said earnings growth of property companies was largely positive, underpinned by stable new sales and progress billings from ongoing projects.
“Nevertheless, the higher expenses weighed on earnings of Matrix Concepts and S P Setia. On another note, new property sales of developers are mostly in line with managements’ expectations of higher new sales in calendar year 2024 (CY24).
“Looking forward, we expect property developers to record earnings growth in CY25, driven by stable new property sales,” it said.
